Posted by David Leibowitz on October 14th, 2009 in Uncategorized
Bankruptcy can help people with debt. Bankruptcy doesn’t solve problems for people without income.
In this horrible recession, we frequently see clients who are facing bankruptcy and foreclosure because they have lost their jobs. Bankruptcy allows an honest debtor to get a fresh start. However, bankruptcy can’t solve the problems of those who don’t have adequate income with which to live.
Recently, I met a prospective client who has been solidly a member of the upper middle class. He made more than $100,000 per year. He and his wife own a nice home in a nice neighborhood. His wife raised their three children as a full time mom and homemaker. Now he has lost his job. He works part time in retail. His wife works part time in retail. Their combined family income is less than $2000/month. They can’t pay the mortgage any more. It will even be hard for them to pay their rent, eat and live on the income they make. They will almost certainly lose their home to foreclosure. No loan modification can possibly work as 31% of their income isnlt even $700/month – not enough to sustain any mortgage on their moderately priced home – a home which has gone down in value more than 30% since the market peak.
What can be done for this middle-age couple and their family?
Bankruptcy alone is not the solution. Aside from their mortgage, they have hardly any debt. They will have to sell their house and may have a hard time doing so because of the market. Their house may have to be sold in a short sale.
The problem here is less debt related and more income related.
The Solution – Retraining and re-education
People are resilient. They can learn new skills. Community colleges can help people evaluate their skill-set and set them on a course of retraining to productive work for which there is a demand. We can no longer be a nation of consumers and store clerks. We need to produce goods and services which people need and leave us and others around them better off. Every community college can help people learn the skills they need to be able to survive and thrive in the the 21st century information economy.
Never give in
The words of Winston Churchill have never been more apt – “Never give in. Never give in. Never, never, never, never – in nothing, great or small, large or petty – never give in, except to convictions of honor and good sense.”